Eurozone Governments Agree on Financial Support Mechanism for Greece
The agreement in brief
· On 25 March the 16 member governments of the Eurozone agreed on a framework for a 'last resort' stand-by facility for the Greek government should market finance prove 'insufficient'.
· If activated, this would involve co-ordinated bilateral loans from the other 15 Eurozone governments, plus a significant element of IMF finance.
· The size of the facility and the timing of its activation have been left open, to be determined unanimously by the Eurozone members on the basis of assessments by the European Commission and the ECB.
· The loans would be subject to strict conditionality and provided on non-preferential terms, at interest rates higher than the Eurozone average and entailing no element of subsidy, to encourage Greece to return to the markets as soon as possible.
Market conclusions: positive for euro and spreads of periphery government bonds (Greece, Spain & Portugal), neutral for German bonds, as no funds actually deployed.
© Eurozone Advisors Ltd
Documents associated with this article
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EZA938.pdf
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